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Much like sunscreen, business insurance is one of those things
you don’t realize how important it is until you’ve been burned: A
lot of entrepreneurs don’t have it, and those who do, may not be
fully covered.

While large corporations have staffers specifically trained to be
sure the business is protected adequately, small business owners
are often not aware of the risks their business faces.

“Smaller businesses tend not to get the right amount of
coverage,” says Loretta Worters, vice president of the Insurance
Information Institute, an industry trade group that aims to
educate the public about insurance. “They will get too little or
not the right coverage.”

Here, three of the most common mistakes to avoid when deciding on
business insurance.

1. You view insurance as one-size-fits-all.
Think again. There are four basic types of insurance that all
businesses need, according to Worters. Property insurance
protects the building that your business is housed in and the
inventory, raw materials and computers that you own. Liability
insurance protects you against lawsuits. Business vehicle
insurance covers any autos owned by the business. Finally, in
every state except Texas, a business with employees must have
workers compensation insurance should an employee be injured on
the job.

In addition, every industry has its own specific risks and your
business may require a specialized policy. “You need to get an
agent that understands your line of business,” says Worters,
noting that you should talk to an agent before just signing up
with one. Ask a local business group or association for a
recommendation.

2. You think you're covered by another policy.
“The biggest mistake [business owners] make is they assume they
don’t need coverage,” says Ted Devine, CEO of Dallas-based
Insureon, an online small-business insurance agency. He says
business owners often falsely believe their company is covered by
their client's policy or they're no longer at risk when a client
leaves. Not true, according to Devine. A client can come back and
sue you years after an event or transaction occurs, he warns.

And don't think your homeowner's policy will bail you out,
either. Even if you have a home-based business, a homeowner's
policy won't protect it should you get into any legal issues with
employees or business litigation. Whether the homeowners’ policy
will protect your business property in your home depends on the
policy, says Devine.

3. You think you're invincible. Worters says
many businesses don’t even consider what is called either
business income or business interruption insurance. If a natural
disaster hits, for example, and your business closes, your
revenue can be immediately shut off for an undetermined amount of
time, and that can really threaten the life of your business.